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Lehman Brothers Files Bankruptcy - Sell Sell Sell

by Ron Douglas
33 replies
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According to CNBC, Lehman is going to file bankruptcy. This is a shocking end to the storied 158-year-old investment firm.

Stock markets worldwide are going to tank big time tommorow. There will be a huge chain reaction amongst other firms who have counterparty risk with Lehman. Merrill, AIG and others could be next.

Is it wrong to use this event as an opportunity? It's a valid reason to email your list about having a "Plan B" in this crazy environment.

Also, once the smoke clears, this could be a once in a century investment opportunity. Wait for a big collapse and then average in to the best mutual fund you can find a little bit each month. Obviously that's my opinion, not advice.

What do you think?
#bankruptcy #brother #files #lehman #sell
  • Profile picture of the author cypherslock
    Lehmann is a big firm?
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    • Profile picture of the author Jesus Perez
      Originally Posted by cypherslock View Post

      Lehmann is a big firm?
      Number 47 of the Fortune 500 in 2007. One of the world's biggest banks. I believe they own American Express.
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    • Profile picture of the author myob
      I made a lot of money in the Savings and Loan crisis in the 1980's and am going to do it again this time around. Lehmann will be bought out, and the stocks will take off. Housing has never been cheaper either.
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      • Profile picture of the author Ron Douglas
        Originally Posted by myob View Post

        I made a lot of money in the Savings and Loan crisis in the 1980's and am going to do it again this time around. Lehmann will be bought out, and the stocks will take off. Housing has never been cheaper either.
        Check the news - it's a wrap for Lehman.

        You're right about housing. I have a couple of offers for investment properties I'm waiting to hear back on tomorrow. The good news is rents have not gone down and it's easy to find a high cash flow property with good tenants in the market where I'm looking.

        The stock market is tricky though. You never know how far down it can go but if you average in when it's down and can wait 3-5 years you'll make lots of money.
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  • Profile picture of the author cremaster
    Ron,

    I think that the market has already discounted the stock of Lehman (down 94%) and the other companies.

    The lesson to be learned might be that "too big to fail" is no longer true.
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    • Profile picture of the author Ron Douglas
      Originally Posted by cremaster View Post

      Ron,

      I think that the market has already discounted the stock of Lehman (down 94%) and the other companies.

      The lesson to be learned might be that "too big to fail" is no longer true.
      Yes, there's no such thing as too big to fail and the stock of Lehman has already been discounted. However, the domino effect it will have on the market and other companies with counterparty risk with Lehman has not been discounted. Watch what happens to AIG tomorrow if they don't raise capital before the market opens.
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    • Profile picture of the author Dean Shainin
      Hi Ron,

      I try my best to stay out of these types of posts but failed earlier today.

      From my point of view this might have an impact on all of us in a way that's never been seen before. I hope I'm wrong. We will know within the next 24 hours at the close of the trading day on Monday.

      I read this news article earlier today and got a real headache when I realized what might happen on Monday if someone does not bail out Lehman. The situation is already a very serious matter even with a bail out.
      Lehman Brothers crisis shakes Wall Street's corridors of power - Telegraph

      As for opportunity it's tough for me to even think in that direction at this point in time as far as the stock market goes but savvy stock traders might make a lot of money with their puts. Puts are up 100% for several financial companies in October which means lack of confidence among other things in some sectors.

      The Freddie and Fannie $200 Billion bail out was a big deal let alone all this other stuff going on at the same time including AIG and WaMu.

      It does not look good for our financial system here in the US from my point of view if these guys don't find a way to control panic within the markets Monday.

      How many companies can the Feds bail out without causing a tax revolt?

      Who's next?

      And it's just my point of view.

      Cheers,
      Dean
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      • Profile picture of the author TopNotchContent
        Interesting news about Lehman and unfortunate to say the least.

        I checked the over night quotes and the dow is down over 300 points, bonds up 2 pts and dollar down 90 basis points. Gold is up 22 dollars also. Classic flight to quality move.

        Hold on to you hats folks things will get interesting.
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  • Profile picture of the author Tsnyder
    On a positive note the 10 year bond rate is in the tank so
    mortgage rates will probably go even lower in the near term...
    assuming anyone can qualify under current risk based underwriting
    guidelines... lol

    Tsnyder
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  • Profile picture of the author Scott Lundergan
    It will be interesting to see how people with a Lehman mortgage will deal with it (or those who are owned by them, like Aurora Loan Services). For those who aren't aware, basically Lehman buys out tons of mortgages if you want to know the very simple base of it, that's not everything, but from what it seems..where a majority of their problems are coming from. I usually stay out of posts like these and focus my energy elsewhere, but like someone else said above..it can have a major effect and those that are tied to their mortgages (as in...the person paying the mortgage on the house who pays Lehman)
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  • Profile picture of the author jbolte1976
    I think there's going to be a great entry point into the market; the question is when is it going to bottom? I'm glad I'm in my early 30's so when I retire (draw on my 401k, Roth, etc) this'll only be a small dip in the long trend.

    If you have some cash on hand I'd keep an eye out for some quality but unnecessarily beat up stocks. IMHO.
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  • Profile picture of the author derekwong28
    I would be extremely careful about this. In the eighties, the Japanese were the most confident about their economy in the world.

    Japan Nikkei all-time high: December 29, 1989 38957.4
    Now 12,214.76, that is almost 19 years later.

    The collapse in Japan was brought by the collapse of their property bubble that led to bank insolvencies. Does that sound familiar? they are still feelng the effects 19 years later. The hope is that the Feds will not make the same mistakes as the Japanese.

    Anyway, whether there are opportunities or not, I would be much more concern about the potential impact on the economy. If there is a deep recession, although some sectors do better than others, eventually almost every single sector is affected.
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    • Profile picture of the author Kay King
      It's official - Lehman has announced plans to file bankruptcy (dated 9/15) on it's site at Lehman Brothers
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    • Profile picture of the author Ephrils
      $75 BILLION? The federal government bails out companies with that much money?

      OK wait... what about the people that make the country go around. We don't see any of that $75 billion. If this isn't an obvious indication of the governments favoritism to big business what is? They could give us a tax break, better refund checks, all kinds of things with $75 BILLION.

      Wow... can we just fire everyone currently holding office?
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  • Profile picture of the author derekwong28
    What has happened is just disgusting to say the least. I used to respect Greenspan, the feds and the American financial system enormously but now they have proven themselves to be mere amateur cowboys. House prices in he US has only dropped about 20% and look what has happened. There is probably at least another 20% to go and I just cannot imagine what the end result would be.

    Whereas during the emerging markets crisis in 1997-98, house prices here in Hong Kong went down by over 70% and not a single bank or institution became insolvent. The main reason was that everybody knew there was a mother of all bubbles here in the property market and banks were only allowed to lend up to 70% of the property price. Moevoer, stringent income and background checks were required.

    Morover before then, Chris Patten and the succeeding tried to dampen down the speculative bubble by introducing various measures. So although the bubble did burst violently, it could have been far worse.

    -Derek
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      • Profile picture of the author myob
        AIG is getting an $85 billion loan from the Feds, and there are talks of a buyout of Lehman by Barclays bank.

        There's some cleansing going on in the markets. The dust will settle eventually. We don't know when, or who the next headline-maker will be. But there are a few savy investors that are going to be making a whole lotta money when the stock markets recover.
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  • Profile picture of the author Paul1234
    Nice little bump:

    Gold prices post biggest 1-day gain ever: Financial News - Yahoo! Finance
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  • Profile picture of the author Phnx
    The only problem with that is the Federal Reserve isn't actually part of the Government. The American people therefore don't own AIG. They probably used your taxes to bail them out though. LOL. The American taxpayers have been shafted in more ways than one.

    Your President picks the Head of the Fed, and then gives his selection to Congress for approval. However, that's really just to keep the public from cottoning on to what's going on. The list the Prez makes his selection from is given to him by the Fed themselves.

    "It is well that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning." - Henry Ford

    Who owns the Fed?

    Heh the Feds official site gets a bit sniffy "we are independant and completely non-profit" Riiight.

    If there was no chicanery going on then why is it so few Americans understand that the Fed is not owned by the Government? They chose the name specifically when setting it up precisely so people would assume it was part of the federal government.
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    • Profile picture of the author MaskedMarketer
      Originally Posted by Ron Douglas View Post

      Is it wrong to use this event as an opportunity? It's a valid reason to email your list about having a "Plan B" in this crazy environment.

      Also, once the smoke clears, this could be a once in a century investment opportunity. Wait for a big collapse and then average in to the best mutual fund you can find a little bit each month. Obviously that's my opinion, not advice.

      What do you think?
      Ron,

      Yes, e-mail your list, express your concern, and offer them an option.

      Corporate America is falling apart.

      If you think now, and the coming years are good investment opportunities, then your absolutely correct. Depends what you're investing in, but right now, when times are tough, the rich just keep getting richer.

      As far as investing in RE- There will be many, many, many millionaires and billionaires created over the coming years. Even online, home based business, can be even more secure than a "corporate" job.

      What you need to do is, find trends, where the money making opportunities are, and capitalize on them. Obviously only a handful of people will probably take advantage of this, but its out there.


      Originally Posted by Phnx View Post

      The only problem with that is the Federal Reserve isn't actually part of the Government.
      Yeah, the Fed. Reserve just makes bank off printing more and more money- which isn't backed by gold- so essentially our money is really worthless.. really it is..
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  • Profile picture of the author bendiggs
    It's amazing how quickly this domino effect has cascaded through major financial institutions. We have lost some of the biggest finanacial companies in the WORLD in the last three months, and there doesn't seem to be an end in sight. Rome fell to barbarians at the gates, will America fall to idiots at the banks? Things just keep getting worse, and there is nothing I can do about it but hold on and ride out the worst financal crisis in my life time. I'm SOOOOOOOO happy!
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  • Profile picture of the author derekwong28
    I am thrilled to hear this today from the CEO of Morgan Stanley. Just what poetic justice, what crocodile tears!

    "The Wall Street Journal’s DealJournal blog has gotten ahold of what it says is a memo to employees of Morgan Stanley (MS) from CEO John Mack, asserting that the plunge in Morgan Stock — it’s down 27% at $20.20, but earlier fell as much as 39% — is “irrational” and driven by short-sellers.

    “What’s happening out there?” the memo runs. “It’s very clear to me - we’re in the midst of a market controlled by fear and rumors, and short sellers are driving our stock down.” You can read the full memo at the DealJournal link."

    Morgan Stanley is perhaps the most feared short sellers of stocks on the planet. Many would be glad to see the back of that firm.
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